Here are 5 common financial crises most people face at some point in their lives and how to deal with them.
Many of us tend to live in the moment, or more appropriately, for the moment, at least as far as our finances are concerned. The more financially stable or secure we are, the more we tend to get complacent with our spending, basking in the glow of our apparent ‘security’.
Unfortunately, financial emergencies can come unannounced and can hit with devastating force. Sometimes, the impact is so great, that recovery takes years or even a lifetime.
Lucky for you, we’ve listed down five common financial crises that people typically tend to face in life as well as some wise tips on how you can prepare yourself to deal with them. Let’s get started:
Financial Crisis #1: Sudden unemployment
Everything seems all hunky dory in terms of financial stability as long as we have a job that pays us well. But, it doesn’t take long for things to change since layoffs are becoming quite common in this day and age.
The recession that hit our economy in 2008 left thousands of people unemployed, with the IT industry bearing the brunt squarely on its chin. Sudden or unexpected unemployment can completely throw your life in disarray, especially if you don’t have any savings to tide you over.
Rudimentary things like paying for groceries, utilities and other basic expenses start becoming troublesome without a constant flow of money. A sudden loss of job is one of the most common financial crises people tend to face, which often leaves them completely stumped.
BB Tip: The best way to deal with any financial crisis is to be prepared for it well in advance. In order to shield yourself from financial hardships due to a loss of job, one must create an emergency backup fund that can help you with your day-to-day finances for at least 3-6 months.
Investing in a Fixed Deposit or Recurring Deposit is a great way to ensure that you have a financial safety net in case of loss of income. Also, put your other skills to good use and look out for alternate sources of income.
Additional Reading: How To Put Together An Emergency Fund
Financial Crisis #2: Medical emergencies
Health is wealth. But, as we grow older, our health tends to take a beating, especially if the lifestyles we lead are less than savoury. There are various illnesses and ailments that creep into our body with age. While you are busy planning your future, an unexpected illness can strike you or your loved ones, plunging you into emotional as well as financial turmoil.
Heart attacks, high blood pressure, diabetes etc. are some of the most common age-related ailments that can completely destabilise a person’s financial position. Even, fatal diseases like cancer are becoming more common these days, which is why acquiring Cancer Care Insurance is on the rise as well.
To deal with such unexpected illnesses, one needs to be financially well prepared. And if you are living hand to mouth and barely have the funds to deal with such situations, you could be drowning in debt before you know it.
Money Tip: We believe in the saying, ‘Prevention is better than cure’. So, instead of taking out loans or breaking your investments, the best way to deal with a medical emergency is by buying a good Health Insurance policy well in advance.
Make sure that your Medical Insurance covers your spouse, kids and parents as well. A Health Insurance policy not only takes care of your health, but also keeps your wealth intact.
Additional Reading: Why Health Insurance Is A Must In Financial Planning
Financial Crisis #3: Theft and loss of property
All of us believe in acquiring assets and often invest in cars, gold, real estate and more. But, what if your assets are stolen or even damaged? The number of cases of theft and robbery have been increasing over the years, while there have also been numerous instances of destruction of property due to fire or structural instability. And yet, we don’t take the necessary precautions to safeguard our assets.
Money Tip: Learn from the mistakes of others and safeguard your property and assets by purchasing various types of insurance. If you own a car, then Car Insurance is a must to cover your losses in case of theft or damage. Similarly, invest in Home Insurance since it will save you a lot of money in case of damage due to fire, floods etc.
Additional Reading: A Quick Guide To Home Insurance
Financial Crisis #4: Personal Accidents
Accidents can happen any time, any place. Despite all the precautions and safety measures we may take, accidents happen time and again.
Whether it’s a road mishap or an unfortunate occurrence at work, accidents can lead to serious injuries that might require immediate medical treatment and long-time medical care. In some cases, it can even lead to permanent disability or even death.
And yet, most of us think that we will never meet with an accident and leave ourselves unguarded against mishaps and any financial crises that may follow. Fatal or not, injuries due to serious accidents require medical care, which can be very expensive.
And since you may take a while to recover, there’s also a possibility that you will be without a steady income due to loss of pay. This could certainly affect your household finances and eventually place you in a financial pickle.
Money Tip: Instead of running from pillar to post for loans at the time of a financial emergency, it is better to invest in advance in accident insurance and personal insurance that covers your medical treatment at times of unfortunate mishaps.
Also, having a Car Insurance policy helps to claim for the damages occurred to the car during the accident. And to deal with the no income situation, invest in money growing schemes like Mutual Funds that can be liquidated easily during emergencies.
Additional Reading: 9 Things To Do After A Car Accident
Financial Crisis #5: Death of spouse
Life can be cruel and unpredictable at times. And there is nothing sadder and more painful than the untimely demise of your spouse. While we all need time to mourn and take time to get back on our feet, life continues to go on.
Taking care of children, paying bills and managing expenses can become a struggle without the care and financial support of your partner. And during such times, you long for financial support that can help you keep your head above water.
Money Tip: Never underestimate the power of Life Insurance. It can keep your family from going through financial trouble long after you are gone. Irrespective of whether your spouse is working or not, make sure you buy Life Insurance cover since it will ensure financial stability at times of emotional turmoil.
Additional Reading: 5 Things To Keep In Mind While Buying Term Insurance
Financial troubles can attack you at any time, which is why the best the way to face them is to be prepared in advance. Apart from following the money tips that we shared to safeguard yourself from a financial crisis, clear your debts and reduce unnecessary expenses in order to increase your savings.
In the meantime, check out some of our financial products that could help you do just that.